Brazil bank’s rate cut not its last

Brazil’s central bank has signalled it will keep cutting interest rates at its current half-point pace as it tries to prevent Europe’s spreading debt crisis from stunting growth in Latin America’s biggest economy.

The bank’s board, led by bank president Alexandre Tombini, voted to reduce the benchmark rate by 50 basis points for a third straight meeting, to 11 per cent.

Policymakers, in a statement identical to the one from their previous meeting, said “moderate" rate cuts could mitigate the effects of the worsening global economy without putting at risk its 2012 inflation target.

“They are really comfortable with the pace they have adopted so far, and with the strategy of being conservative in response to these international jitters," said Jankiel Santos, chief economist at Espirito Santo Investment Bank. Mr Tombini was one of the first policymakers to react as Europe’s crisis deepened. Brazil’s surprise interest rate cut in August was its first in more than two years.

The deterioration of the world economy was in line with policymakers’ forecasts, so they did not see a need to step up the pace of rate cuts, said Gray Newman, Morgan Stanley’s chief Latin America economist.

“When the central bank first embarked on rate cuts, they were already expecting a pretty difficult global scenario," he said.